Tax Notes

The Supreme Court’s narrow focus in its Moore decision doesn’t condone the allocation of foreign funds to a U.S. entity and their treatment as U.S. income when payments were blocked under the foreign country’s laws. In a July 11 letter filed with the Eighth Circuit in 3M Co. v. Commissioner, 3M claimed that the Supreme Court’s decision in Moore v. United States (No. 22-800) is not relevant for the allocation of royalties from its Brazilian subsidiary to the parent 3M Co. in the United States because Moore did not deal with the question of income under section 482. “Moore did not address that (or any) statutory interpretation issue — let alone abrogate the holding of Commissioner v. First Security Bank of Utah, N.A., 405 U.S. 394 (1972), that blocked payments are not 'income' under Section 482,” 3M’s letter says. Continue reading 👇 (Photo by Gerard Stolk via Flickr)

"The tax system dodged a major bullet when the Supreme Court refused to constitutionalize the realization requirement in Moore. "But the decision also indicates that the Court is likely to strike down a mark-to-market tax on billionaires as proposed by the Biden administration and by Sen. Ron Wyden, D-Ore. (S. 3367). "Four justices (Clarence Thomas and Neil M. Gorsuch in dissent and Amy Coney Barrett and Samuel A. Alito Jr. in concurrence) clearly indicated that they regard realization as a constitutional requirement. "Congress is not likely to risk an adverse outcome by adopting either a wealth tax or a mark-to-market tax, so what comes next?" Perspective: Reuven S. Avi-Yonah proposes how to tax the wealthiest members of society in a constitutional manner in the wake of the Moore v. United States decision.

The Supreme Court’s overturning of Chevron deference boosts the likelihood that a lawsuit to block the IRS from making permanent its own free electronic tax return filing system would be filed — and be successful. according to the top Senate Republican taxwriter. That's according to Senate Finance Committee ranking member Mike Crapo, R-Idaho, has fought the IRS for more than a year about its Direct File program — first, over the agency’s feasibility study for the service, then the subsequent launch of a pilot program in the 2024 filing season, and finally, the decision to make the offering permanent. Crapo has argued at each turn that the IRS lacks statutory authority to build and run the program. Read the full story from Sword Doug 👇 (Photo by U.S. Department of Agriculture via Flickr)

"One of the things that's been written about Moore v. United States from the get-go is that it's an interesting little case, a quirky case, but it's really not a very good litmus test for what the Supreme Court is going to decide on either a mark-to-market regime or a federal wealth tax. "If this was going to be your test case to determine the legality of a federal wealth tax, you picked the wrong test case. So that's one takeaway there that you're going to have to do this again, which means we get to come back in some future year and go through all of this again. "I have no doubt somewhere out there as we speak, some enterprising taxpayer is trying to figure out a way to bring a constitutionally based challenge against, say, the mark-to-market regime. "They can't bring a case against the wealth tax because it doesn't exist yet, and the Supreme Court is not going to give you an advisory opinion on what kind of future uncodified tax provisions are going to be legal or not. So we'll just have to wait." ICYMI: The transcript of Robert Goulder's explanation of the Supreme Court’s ruling in Moore v. United States is now available ⬇️

"Some have said the cost of this with respect to how we are as a country is just too prohibitive to continue at higher levels." ☝️ Professor Ted Peterson discusses the SALT deduction cap and its potential paths forward as the 2025 sunset date approaches: pod.link/TaxNotesTalk

The OECD is working on identifying jurisdictions that are planning on adopting the optional amount B transfer pricing simplification framework and will likely release a list in October, an OECD official said. Stakeholders have been asking the OECD for more transparency about which countries have opted to apply the amount B rules, and the OECD will deliver, according to Achim Pross, deputy director of the OECD Centre for Tax Policy and Administration. Read more from Stephanie Soong ⬇️ (Photo by OECD/Michael Dean via Flickr)

House Republicans called on department and agency heads to detail how the toppling of the Chevron doctrine could affect their interpretations of statutes and litigation during the Biden administration, explicitly citing rules related to the White House’s climate, clean energy, and environment priorities. The Supreme Court’s Loper Bright Enterprises Inc. v. Raimondo decision is on senators’ minds as well, although they’re taking more of a wait-and-see approach, reaching out to legal experts and waiting for others to weigh in on how the opinion will change their approach to writing legislative text. House Majority Leader Steve Scalise, R-La., announced that on July 10 House Republican committee chairs sent letters to 14 of the 15 cabinet-level departments and another 22 agencies, demanding information on how the overturn of Chevron would influence actions, litigation, and enforcement, and whether actions, litigation, and enforcement would have been undertaken in the first place if the Chevron deference hadn’t been in place. Read the full story from Sword Doug & Cady Stanton for free ⬇️

🌍 On the cover of Tax Notes International: Melissa Elechiguerra Labarca explains the effects of recent case law and the Securing the Activity Framework of Enablers initiative on the status of taxpayers’ rights in Europe.

Great article today by Andrew Velarde in Tax Notes covering some of the comments on the proposed regulations relating to foreign trusts and large foreign gifts. The title of the article “Commentators Insist on Foreign Trust Reporting Penalty Reform” aptly captures one repeated theme made in many of the comments. The IRS’ administration of foreign trust and foreign gift penalties is simply broken and must be reformed. #tax #taxlawyer #internationaltaxpenalties #form3520 #6039F https://lnkd.in/g9ZbH9Vn

Former President Trump said his idea to eliminate taxes on gratuities came from a single conversation with a “beautiful” waitress. At a campaign rally in Doral, Florida, on July 9, Trump claimed that he consulted a waitress at an unnamed restaurant in Nevada who was upset with income reporting requirements for tips. “I asked the waitress there, who had worked there a long time . . . and she said, ‘It's brutal what they do to us,’” Trump said. “That was the extent of my study — one waitress.” Continue reading 👇 (Photo by Gage Skidmore via Flickr)